23% of homebuyers tell pollsters they regret paying too much
Franklin Schneider | Wealth of Geeks
A new poll shows 23% of recent home buyers say they regret spending too much on their purchase, reports Clever Real Estate.
Historically high mortgage rates and skyrocketing home prices haven’t discouraged too many Americans from buying homes. However, the high cost of buying and maintaining a home has taken its toll.
Of 1,000 recent and future home buyers asked, 43% admit it’s a struggle to make their mortgage payment on time.
Buyers entering the market in 2024 will face many of the same affordability challenges, with an additional obstacle. In August, changes to real estate commission will likely result in buyers having to pay their own agent — adding an additional expense to those who already face challenges in the home buying process.
Buyers Are Struggling
The average home in the United States sells for $492,300, but 52% of most recent buyers — those who bought a house in 2023 or the first half of 2024 — spent at least $500,000, Clever reports.
Consequently, around 38% report overpaying, and 23% regret spending too much.
As a result of sky-high home prices, many buyers report financial overextension — nearly half say they’ve struggled to make mortgage payments on time, and 44% have taken on additional non-mortgage debt since buying.
The financial stress has taken its toll, with 60% of buyers saying their finances have not improved since buying a home and 51% saying their overall happiness hasn’t improved, either.
An estimated 68% of respondents said they’re glad they bought — if only because they think home prices and interest rates will continue to rise.
Still, 82% of recent homebuyers report at least one regret. Aside from spending too much, 28% of buyers regret their buy requires too much maintenance, 24% regret that their home doesn’t meet all needs, and 23% report dissatisfaction regarding high interest rates.
Buyer Sentiment Toward Agents
While most buyers used real estate agents to purchase their homes, not all who did were satisfied. More than half of recent home buyers said their agent cared more about closing the sale than their clients’ best interest. Nearly half (42%) said their agent was less helpful than expected.
Nearly one in three buyers (29%) had so many real estate agent worries that they opted to bypass them.
Of those who skipped an agent, 32% said they did so because they don’t trust agents. About 30% said they bought without an agent because it cost them less money, despite the sellers paying both agent commissions under the current system.
Commission Changes Are Imminent
Under the present commission system, sellers pay their listing agent and the buyer’s agent. However, in March, the National Association of Realtors (NAR) settled a federal lawsuit by sellers claiming the commission system amounted to illegal price-fixing.
Under settlement rules, which take effect in August, sellers will pay their agent, and buyers will pay theirs.
This settlement evoked mixed feelings; while 94% of sellers support this change, only 61% of buyers do. Despite conflicting opinions from consumers, experts believe these changes will improve commission-related flexibility.
Additionally, these changes will boost transparency, a significant shift considering three in four respondents reported they’d be more inclined to utilize real estate agents if they had detailed cost breakdowns.
Not all buyers are on board. One-third of upcoming buyers said paying their agent would decrease their desire to work with one, and 50% said they’re considering buying without an agent because of new commission rules.
More than half of prospective home shoppers (51%) are fast-tracking buys, so sellers are responsible for commission.
How Far Will Commission Fall?
The average buyer’s agent commission rate in the U.S. is 2.66% of the final home sale price, but 51% of buyers think a fair commission rate is 2% or less.
“It’s difficult to predict how much commission will decline,” says Steve Brobeck, a real estate commission expert and senior fellow at the Consumer Federation of America. “Some experts predict they could decline as much as 50% or more. We’re holding to our estimate that commission will decline by 20%-30% — averaging 3%-4% rather than the current 5%-6%.”
Nearly every industry expert agrees that new commission rules will lower the average rate as buyers negotiate directly with their agents; 70% of potential buyers expressed willingness to negotiate real estate commissions directly.
Other buyers had a different idea about how to absorb new commission costs. About 27% state they would buy cheaper properties and trim their budget by an average of $13,167.
The settlement will also provide opportunities for those exploring new compensation models, such as an a la carte option in which buyers only pay for the services they need. With these changes shaking up the real estate market, it could be in for a boom.
“If commission rates decline, so would consumer costs,” Brobeck explains, “and that should modestly stimulate home sales.”
This article was produced by Media Decision and syndicated by Wealth of Geeks.